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2025 Supreme(Online)(ATFP) 13050

APPELLATE TRIBUNAL FOR FORFEITED PROPERTY
Munishwar Nath Bhandari, CHAIRMAN, Gopal Chandra Mishra, MEMBER
Shri Gautam Sigamani K.S. Rajamahendran K.Sathanandam M. Gopinathan K.S. Kavitha – Appellant
Versus
The Deputy Director Directorate of Enforcement Chennai – Respondent
FPA-PMLA-4890/CHN/2022

Advocates:
For the Appellants/Petitioners: Nizam Pasha, Siddharth Kaushik, Arif Ali, Charu Sharma
For the Respondents: Anubha Bhardwaj, Mayank Bawa

Under PMLA, property equivalent in value to proceeds of crime can be attached even if acquired prior to the scheduled offence, when the actual proceeds are untraceable.

Headnote:(A) Prevention of Money Laundering Act, 2002 - Sections 2(1)(u) (proceeds of crime), 3, 5, 24 - Attachment of property - Definition of proceeds of crime includes value of any such property - Property acquired prior to commission of scheduled offence can be attached if equivalent value of proceeds not traceable - Burden of proof on accused under Section 24 to show property not proceeds of crime. (Paras 32-36)

(B) Mines and Minerals (Development and Regulation) Act, 1957 - Indian Penal Code, 1860 - Scheduled offences - Illegal mining - Excess quarrying beyond permitted limit - Revenue loss - Criminal conspiracy.

Facts of the case:
An FIR was registered for alleged illegal mining of red sand under the influence of a former Minister for Mines and Minerals of a State. Licences to quarry were obtained in the names of relatives and associates. Investigation revealed excess quarrying of red sand beyond permitted quantities without payment of seigniorage fees, causing a total revenue loss of Rs.28,37,85,600. Based on the scheduled offences, an ECIR was registered under PMLA for money laundering. The Directorate of Enforcement provisionally attached 27 immovable and 5 movable properties, which was confirmed by the Adjudicating Authority. Appeals were filed challenging the attachment.

Findings of Court:
The Tribunal held that the respondent had provided a clear basis for calculating proceeds of crime based on statements of quarry managers and the excess loads transported. The appellants failed to discharge the burden under Section 24 to prove that the income was from legitimate sources. The definition of 'proceeds of crime' under Section 2(1)(u) has three limbs; the second limb allows attachment of property of equivalent value when the actual proceeds derived directly or indirectly from the crime are not traceable. This includes property acquired prior to the commission of the scheduled offence. The disclosure of income in tax returns does not render the income legitimate if the source is proceeds of crime. The Tribunal relied on earlier decisions of the Appellate Tribunal and High Courts.

Issues: (i) Whether properties acquired prior to the commission of the scheduled offence can be attached as proceeds of crime under PMLA. (ii) Whether the determination of proceeds of crime was without any basis. (iii) Whether disclosure of income in tax returns absolves the property from being considered proceeds of crime.

Ratio Decidendi: The definition of 'proceeds of crime' is wide and includes not only property derived directly or indirectly from criminal activity but also the value of any such property. When the actual proceeds are not available or have been siphoned off, property of equivalent value, even if acquired before the crime, can be attached. The burden lies on the accused to prove that the property is not proceeds of crime.

Result: Appeals dismissed.

ORDER

02.12.2025

The batch of appeals have been filed to challenge the order dated 22.08.2022 passed by the Adjudicating Authority confirming the Provisional Attachment Order (‘PAO’) dated 23.11.2021. It was for attachment of 27 immovable and 5 movable properties. The value of the movable properties is of Rs.19,11,98,679/-, while the value of 27 immovable properties as on the date of registration of deed was of Rs.1,70,64,725/- while current guideline value is of Rs.5,74,95,619/-.

Brief facts of the case:

2. The PAO as well as the order passed by the Adjudicating Authority confirming it, were arising out of an FIR bearing No. 19/2012 registered against Shri K Ponmudi and others for commission of offences under Sections 406, 420 and 379 read with Section 120B of the Indian Penal Code, 1860 (‘IPC’) along with Section 13(2) read with Section 13(1)(d) of the Prevention of the Corruption Act, 1988. It was even for section 4(1) and 4(1A) read with Section 21 of the Mines and Minerals (Development and Regulation) Act, 1959 apart from Rule 36A of the Tamil Nadu Minor Mineral Concession Rules, 1959 .

3. After registration of the FIR, the investigation was caused by the investigating agency and finding evidence for commission of offence, a charge-sheet was filed before the Court on 20.12.2012. It was alleged that Shri K. Ponmudi while serving as a Minster for Mines and Minerals in the State of Tamil Nadu entered into a criminal conspiracy with his son, Shri Gautham Sigamani and other related persons for obtaining quarry licences of red sand in favour of his son (two licences), one Shri Jayachandran, a friend of his son (one licence) and Shri K.K. Rajamahendran, his son’s brother-in-law (two licences). The licence holders allegedly quarried red sand beyond the permitted quantities without payment of seigniorage fees, thereby causing wrongful loss of Rs.28,36,40,600 to the Government of Tamil Nadu. The offences under Sections 420 and 120B IPC and Section 13 of the Prevention of Corruption Act are scheduled offences under the PMLA. Since the offences mentioned in the FIR were scheduled offences under Section 2(1)(y) of the PMLA, a prima-facie offence of money laundering under Section 3 of the Prevention of Money Laundering Act, 2002 (in short “the Act of 2002”) appeared to have been made out, and accordingly, ECIR No. CEZO-11/02/2019 dated 25.04.2019 was registered by the Directorate of Enforcement, Chennai.

4. According to the FIR and the charge-sheet filed by the District Crime Branch, Villupuram, it was revealed that from 13.02.2007 to 15.02.2011, when Shri K. Ponmudi was holding charge as Minister for Mines and Minerals exercised his influence over Shri Krishnamurthy, Assistant Director, Mines and Minerals Department, Villupuram, who was directly under his administrative control, and directed him to accept and process the quarry licence applications submitted by Shri Gautham Sigamani, Shri K.S. Rajamahendran and Shri Jayachandran without raising any objections. It was further found that Shri Ponmudi decided to obtain quarry licences in the names of his son, relatives and close associates, and thereby misuing his official position.

5. The investigation further revealed that Shri Gautham Sigamani had acquired patta land in Poonthurai Village under Survey Nos. 405/1B (52.0), 405/12 (35.5), aggregating to 87.5 hectares, vide Document No. 1017/2007 dated 16.02.2007, from one Mahaveer of Vepery, Chennai. He entered into a three- year lease agreement with Shri Jayachandran, who applied for a licence to quarry red sand on 02.03.2007. Under the influence of Shri Ponmudi, Licence No. RC A/G&M/517/2007 dated 21.03.2007 was issued permitting quarrying for three years. Under the administration of Shri Loganathan and Shri Sathanandam, 33,094 lorry loads of red sand were quarried against the permitted 10,000 loads, resulting in an excess of 23,094 lorry loads without payment of fees, thereby causing a revenue loss of Rs.2,65,58,100.

6. On 02.08.2007, Shri

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2025 Supreme(Online)(ATFP) 13050

APPELLATE TRIBUNAL FOR FORFEITED PROPERTYMunishwar Nath Bhandari, CHAIRMAN, Gopal Chandra Mishra, MEMBERShri Gautam Sigamani K.S. Rajamahendran K.Sathanandam M. Gopinathan K.S. Kavitha – AppellantVersusThe Deputy Director Directorate of Enforcement Chennai – RespondentFPA-PMLA-4890/CHN/2022

Under PMLA, property equivalent in value to proceeds of crime can be attached even if acquired prior to the scheduled offence, when the actual proceeds are untraceable.